5 Stocks Poised for Breakouts - views

WINDERMERE, Fla. (Stockpickr) -- Trading stocks that trigger major breakouts can lead to massive profits. Once a stock trends to a new high or takes out a prior overhead resistance point, then it’s free to find new buyers and momentum players that can ultimately push the stock significantly higher.

An example of a recent successful breakout trade is specialty financial services player Life Partners (LPHI), which I featured in Feb. 7’s “5 Stocks Under $10 Ready to Soar Higher” at around $3.11 a share. I mentioned in that piece that shares of LPHI had been trading inside of a consolidation pattern for the last two months and the stock was just starting to move within range of triggering a major breakout trade above the upper-end of that sideways pattern. That breakout was set to trigger once LPHI manage to take out some near-term overhead resistance levels at $2.90 to $3.16 a share with high volume.

Guess what happened? Shares of LPHI triggered that move on the following trading session with heavy upside volume. This stock has exploded higher since it took out those key resistance levels, with shares hitting a recent high of $4.02 a share. That’s a big gain for anyone who bought the stock in anticipation of the move. Shares of LPHI could still be setting up for higher prices, if the stock can hold some near-term support levels at $3.80 to $3.70 a share and then once it takes out its recent high at $4.02 a share with high volume.

Breakout candidates are something that I tweet about on a daily basis. I frequently tweet out high-probability setups, breakout plays and stocks that are acting technically bullish. These are the stocks that often go on to make monster moves to the upside. What’s great about breakout trading is that you focus on trend, price and volume. You don’t have to concern yourself with anything else. The charts do all the talking.

Trading breakouts is not a new game on Wall Street. This strategy has been mastered by legendary traders such as William O’Neal, Stan Weinstein and Nicolas Darvas. These pros know that once a stock starts to break out above past resistance levels, and hold above those breakout prices, then it can easily trend significantly higher.

One stock that’s trending very close to triggering a major breakout trade is Uni-Pixel (UNXL), a development stage company that has developed, patented and demonstrated a new color display technology in the form of proof of concept prototypes, which it calls Time Multiplexed Optical Shutter. This stock has been on fire so far in 2013, with shares up 32%.

If you take a look at the chart for Uni-pixel, you’ll notice that this stock has been uptrending strong for the last month, with shares soaring higher from its recent low of $12.53 to its high of $18.87 a share. During that uptrend, shares of UNXL have been consistently making higher lows and higher highs, which is bullish technical price action. That uptrend has come with heavy upside volume days and it’s now pushing shares of UNXL within range of triggering a major breakout trade.

Traders should now look for long-biased trades in UNXL if it manages to break out above some near-term overhead resistance levels at $18.87 to $19.67 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 643,079 shares. If that breakout triggers soon, then UNXL will set up to enter new 52-week high territory, which is bullish technical price action. Some possible upside targets off that move are $25 to $27 a share.

Traders can look to buy UNXL off any weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support at $16.50 a share. One could also buy off strength once UNXL takes out those breakout levels with volume and then simply use a stop that sits just below $18 a share.

This stock has big time short-squeeze potential if that breakout triggers soon, since its current short interest as a percentage of its float is crazy high at 28.4%. The float is also very small for UNXL at just 7.97 million shares, so if that breakout hits be ready to play it.

Westport Innovations

Another stock that’s trending within range of triggering a near-term breakout trade is Westport Innovations (WPRT), which is engaged in the research, development and marketing of low-emission engine and fuel injection systems that utilize alternative gaseous fuels such as natural gas, propane or hydrogen. This stock is off to a decent start in 2013, with shares up 14.5%.

If you take a look at the chart for Westport Innovations, you’ll notice that this stock has been uptrending strong for the last three months, with shares moving higher from its low of $23.01 to its intraday high of $31 a share. During that uptrend, shares of WPRT have been consistently making higher lows and higher highs, which is bullish technical price action. Shares of WPRT have just started to move back above its 200-day moving average of $30.08 today and it’s quickly moving within range of triggering a near-term breakout trade.

Market players should now look for long-biased trades in WPRT if it manages to break out above some near-term overhead resistance levels at $31.60 to $32.64 a share and then once it clears more resistance at $33.30 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 646,160 shares. If that breakout triggers soon, then WPRT will set up to re-test or possibly take out its next major overhead resistance levels above $35 a share to possible $39 a share.

Traders can look to buy WPRT off any weakness to anticipate that breakout and simply use a stop that sits close to some near-term support at $28.61 a share or near its 50-day at $27.74 a share. One could also buy off strength once WPRT clears those breakout levels with volume and then simply use a stop that sits just below its 200-day moving average of $30.08 a share.

This is another name that the short-sellers love, since the current short interest as a percentage of the float for WPRT is massive at 26.8%. We could easily see a monster short-squeeze if WPRT takes out those key resistance levels soon, so be ready to play it.

Delcath Systems

Another stock that’s quickly moving within range of triggering a major breakout trade is Delcath Systems (DCTH), which is a development-stage specialty pharmaceutical and medical device company focused on oncology, primarily cancers in the liver. This stock has been red hot in 2013, with shares up 28%.

This company has a major catalyst on the horizon; it will hear from the FDA in June on the possible approval of Chemostat, which targets an inoperable liver cancer called mestastic melanoma. The estimated domestic market for metastic melanoma chemotherapy is $500 million.

If you look at the chart for Delcath Systems, you’ll see that this stock has been uptrending strong for the last three months, with shares skyrocketing higher from its low of $1.01 to its recent high of $1.68 a share. During that move, shares of DCTH have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of DCTH within range of triggering a major breakout trade.

Market players should now look for long-biased trades in DCTH once it manages to break out above some near-term overhead resistance levels at $1.68 to $1.70 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 1.4 million shares. If that breakout triggers soon, then DCTH will set up to re-test or possibly take its next major overhead resistance levels at $2.24 to $2.38 a share. Any high-volume move above those levels will then put $2.50 to $3 into range for shares of DCTH.

Traders can look to buy DCTH off any weakness to anticipate that breakout and simply use a stop that sits right around its 50-day moving average of $1.40 a share. One can also buy DCTH off strength once it clears those breakout levels with volume and then simply use a stop right below some near-term support at $1.50 to $1.46 a share.

The short interest for DTCH isn’t massive at 8.8% of the float, but the bears have been adding to that position from the last reporting period by 11.9%, or about 701,000 shares. We could see the sellers cover some of those bets if DTCH breaks out soon, so make sure to have this on your trading radar.

KiOR

Another stock that’s moving within range of triggering a near-term breakout trade is KiOR (KIOR), which has developed a proprietary technology platform to convert low-cost, abundant and sustainable non-food biomass into hydrocarbon-based oil. This stock is off to a slow start in 2013, with shares down by 8.5%.

If you look at the chart for KiOR, you’ll notice that this stock has been downtrending for the last three months, with shares dropping from its high of $8.48 to the recent low of $5.45. During that downtrend, shares of KIOR have been mostly making lower highs and lower lows, which is bearish technical price action. That said, shares have started to bounce off that $5.45 low and move into range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in KIOR once it manages to break out above some near-term overhead resistance levels at $6.17 a share to its 50-day moving average at $6.19 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 243,455 shares. If that breakout triggers soon, then KIOR will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $7.33 to $7.66 to $7.90 a share. Any high-volume move above $7.90 will then out $8.48 into range for shares of KIOR.

Traders can look to buy KIOR off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $5.50 to $5.45 a share. One can also buy off strength once KIOR takes out those breakout levels with volume and then simply use a stop right above $5.50 to $5.45 a share.

This is another name that is a favorite target of the short-sellers, since the current short interest as a percentage of the float for KIOR is pretty high at 16.9%. If that breakout triggers soon, then KIOR could easily experience a sharp short-covering rally.

Scorpio Tankers

My final idea that’s trending very close to triggering a near-term breakout trade is Scorpio Tankers (STNG), which is engaged in seaborne transportation of crude oil and refined petroleum products in the international shipping markets. This stock has been ripping higher so far in 2013, with shares up 18%.

If you look at the chart for Scorpio Tankers, you’ll notice that this stock has been uptrending strong for the last three months, with shares soaring higher from its low of $5.19 a share to its recent high of $8.51 a share. During that uptrend, shares of STNG have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of STNG within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in STNG once it manages to break out above its 52-week high of $8.51 a share with high volume. Look for a sustained move or close above $8.51 a share with volume that hits near or above its three-month average action of 275,353 shares. If that breakout triggers soon, then STNG will set up to re-test or possibly take out its next major overhead resistance levels at $10 to $11 a share.

Traders can look to buy STNG off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $7.39 a share. They can also look to buy STNG off strength once it takes out $8.51 a share with volume and then simply use a stop that sits just below some key near-term support levels at $8 to $7.72 a share.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.